On July 1, 2015, Velor Inc. acquired the following bonds, which Velor Inc. intended to hold to maturity:

Both bonds pay interest annually on December 31. Premium and discount will be amortized on a straight-line basis. Assume Velor Inc. follows ASPE. Please make sure your final answer(s) are accurate to 2 decimal places.

1) Prepare the following journal entries to be made on their correct dates in 2015:

1. The acquisition of the investments. Accrued interest was paid on the acquisition dates, as appropriate.
2. The receipt of interest and the amortization of the premium or discount for Zcom Inc.
3. The receipt of interest and the amortization of the premium or discount for Global Filter Corp.

Enter the transaction letter as the description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (i.e., January 15 would be 15/Jan).

2) Show the accounts and the corresponding amounts that would be reported in the 2015 income statement related to these investments

3) Calculate the balance for each investment account on the financial statement date.

2015

Comprehensive Problem (TAX RETURN PROBLEM)

Barry and Connie, Husband and wife, are both age 24, and have two sons. Barry earned $51,000 and Connie earned $45,000 during 2020. They both paid $4,200 state income taxes, $12,000 federal income taxes, $5,500 property taxes, $14,600 to First Presbyterian Church, $600 to needy families, $6,400 interest on their mortgage, and $6,800 medical expenses. In addition, they had the following transaction:

a) They sold their personal residence for $170,000. Their basis in the residence was $104,000. They incurred $7,000 in selling expenses. They purchases a new residence six months later for $220,000.

b) Connie sold for $40,000 property she had inherited from her father in 2015. Her father's basis in the property was $15,000 and the fair market value on the date of death was $30,000.

c) They sold for $6,000 business property which they had acquired as a gift in 2017. The basis to the donor was $7,500 and the fair market value on the date of the gift was $7,000.

d) they exchanged 100 shares of Conway Corp. common stock, with a basis of $3,000, for 75 shares of Conway Corp. nonvoting common stock with a fair market value of 10,0000.

Determine Barry and Connie's lowest taxable income. Treat all income as ordinary income.

The following transactions occurred during 2020. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated salvage value. Depreciation is charged for a full year on all fixed assets acquired during the year, and no depreciation is charged on fixed assets disposed of during the year.

Prepare general journal entries for the transactions

Pesto Company possesses 80% of Salerno Company's outstanding voting stock. Pesto uses the intial value method to account for this investment. On January 1, 2014, Pesto sold 9% bonds payable with a $10 million face value (maturing in 20 years) on the open market at a premium of $600,000. On January 1, 2017, Salerno acquired 40% of these same bondsfrom an outside party at 96.6% of fave value. Both companies use the straigh-line method of amortization. For a 2018 consolidation, what adjustment should be made to Pesto's beginning Retained Earnings as a result of this bond acquisition?

A) $320,000 Increase

B) $326,000 Increase

C) $331,000 Increase

D) $340,000 Increase

A company’s inventory records report the following:

On August 15, it sold 58 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?

A manufacturer of fabricated metal products has acquired a new plasma table for $37,000. It is projected that the acquisition of this equipment will increase revenue by $10,000 per year. Operating costs for the machine will average $2,600 per year. The machine will be depreciated using the MACRS method, with a recovery period of 7 years. The company uses an after-tax MARR rate of 10% and has an effective tax rate of 30%.

2. Now, suppose that the duration of the project is six years and that an estimate of the value of the equipment cannot be obtained from the marketplace.

2.2. Find the before-tax PW, IRR and discounted payback period (before-tax MARR = 10%). Can the acquisition be economically justified? Why or why not?

Assume that TDW Corporation (calendar-year-end) has 2019 taxable income of $698,000 for purposes of computing the §179 expense. The company acquired the following assets during 2019: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2019 on the assets it placed in service in 2019, assuming no bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.)

Assume that TDW Corporation (calendar-year-end) has 2018 taxable income of $674,000 for purposes of computing the §179 expense. The company acquired the following assets during 2018: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2018 on the assets it placed in service in 2018 assuming no bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.)

BFS Limited has agreed to underwrite a forthcoming equity issue (at $6.15 per share which is equal to the current market price) by Australian Foundation Limited (AFI), a Listed Investment Company on the ASX. Any shares acquired by BFS must be held by them for at least 28 days before they can be disposed of. It is currently the start of April and BFS expects that they will have to purchase around 1m shares of AFI in mid-April but will dispose of the shares on market as soon as they are permitted under the underwriting agreement

Explain how BFS can hedge, using futures contracts, the risk associated with any equity it acquires through the underwriting agreement. Include a worked example in your explanation